Owners Corporations and lot owners considering taking legal action against one another should carefully consider the jurisdiction in which they commence proceedings.
For most matters the NSW Civil and Administrative Tribunal (NCAT) will be the appropriate jurisdiction as the Strata Schemes Management Act 2015 (the SSMA 2015) provides that the Tribunal is the primary jurisdiction of disputes under the SSMA 2015. However, it may also be appropriate in some circumstances to take action in a court as not all disputes may be able to be dealt with under the SSMA 2015, a court may have the express jurisdiction or the remedy sought is not available under the SSMA 2015.
Parliament recognised this and included section 253(1) in the SSMA 2015 (the equivalent was section 226(1) in the SSMA 1996) which allows parties to purse remedies outside of the Strata Schemes outside of the Strata Schemes Management Act 2015. However, section 253(1) (like its predecessor) operates to deter plaintiffs (aka applicants) from doing so by providing that a plaintiff is to be liable for the defendants costs if the court, having regard to the subject-matter of the proceedings, finds that taking the proceedings was not justified because the SSMA 2015 makes adequate provision for the enforcement of the lot owners rights and remedies. What this means is that section 253 of the SSNA 2015 makes even successful plaintiffs liable for the defendant’s costs if the matter should have been litigated in the NCAT but was instead litigated in a court.
Section 253’s predecessor, section 226(1) in the SSMA 1996, was the subject of the NSW Court of Appeal decision in EB 9 & 10 Pty Ltd v The Owners Strata Plan 934  NSWCA 288. The Court of Appeal found that although the lot owners were successful in obtaining the right or remedy in proceedings below in the Supreme Court and that the SSMA 1996 made “adequate provision” to enforce the right or remedy they sought. In the case, the lot owners obtained a declaration that they could use part of the common property to manoeuvre their car into their lot parking space. But the Court of Appeal held that a similar remedy could have been obtained and enforced by orders of the Adjudicator exercising their powers under the SSMA 1996 and in accordance with the provisions of the SSMA 1996.
In interpreting section 226(2) the Court of Appeal found “adequate provision” is a provision under the SSMA 1996 that is “at least as effective” as remedies sought outside of the Act. They also found that the SSMA 1996 was still adequate even if the remedy available under it is “less secure or less effective” that one available in a court. The Court found the test for whether proceedings were “justified” was whether it was appropriate (or inappropriate) in the whole of the circumstances of the proceedings. Specifically, for this case, it was held that Tribunal orders under section 61 and 138 of the SSMA 1996 would have been adequate as the relief sought was to prevent the Owners Corporation from dealing with part of the common property.
Written by Gemma Lumley and Allison Benson